Trump Cuts US ties with ByteDance and Tencent 

Summary

  • Disputes between the US and China have fuelled further, following the issuance of two separate executive orders on 6 August 2020, banning any US transactions with the Chinese companies, ByteDance that owns TikTok, and Tencent owner of the WeChat app, beginning 45 days from the order issue date.
  • The executive order states that WeChat and TikTok have had garnered massive swaths of information from its users. It would further allow the Chinese Communist Party access to Americans personal and proprietary data, which could be used for espionage activity by China.
  • Banning of all businesses by the US companies with Tencent is believed to have far-reaching effects than anticipated by the Trump administration.
  • Furthermore, ByteDance and Microsoft are exploring a preliminary acquisition proposal for owning and operating TikTok service in the United States, Canada, Australia, and New Zealand.

US-China tensions flaring over the pandemic and economic damage have emerged again on the investors’ plate.

Earlier, US President Donald Trump had targeted Huawei and other technology companies citing concerns over jeopardising national security. However, later this week, his attention shifted to Chinese apps.

On 6 August 2020, US President issued two separate executive orders announcing ban of US transactions with Chinese technology companies, ByteDance (owner of TikTok) and Tencent (owner of WeChat).

Notably, the ban would be effective in 45 days from the order issue date.

These orders have come into the picture after the announcement made by US Secretary of State Mike Pompeo, stating that the Trump administration wants to purge ‘untrusted’ Chinese tech apps such as TikTok and WeChat from the US application stores.

Moreover, The White House said in its executive order that, “the United States must take aggressive action against the owner of WeChat to protect our national security,”

Additionally, the executive order also stated that 45 days post the date of the issued order, the Secretary shall identify the transactions contingent on prohibited actions.

Having said that, Shares of WeChat owner Tencent Holdings Ltd (HKG:0700) plunged 5.04% (as on 7 August 2020) on Hong Kong Exchanges and Clearing Limited, following the issuance of executive order targeting WeChat, as well as TikTok.

The executive order took a toll on the popular Chinese messaging and digital payment app, WeChat, which has over 1 billion global users.

Furthermore, the executive order said, “WeChat automatically captures vast swaths of information from its users. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”

Did you read; Cyber Espionage Campaign: Strings that tie China, Australia and the US

The aftermaths of the executive order on Tencent might go beyond WeChat as this Chinese technology juggernaut has sizeable ownership stakes in numerous US videogame companies such as Activision Blizzard and Riot Games.

Did US President just knock off the US videogame industry?

An unclear scope of the executive order led to the volatile trading on 7 August 2020.

Do you know, before the decline on 7 August 2020, Tencent was worth US$686 billion, the world’s eighth-largest company in terms of market capitalisation?

Did you read; US-China clash and TikTok controversy

This similar injunction for a ban against ByteDance owned TikTok, has also amplified the pressure on negotiations over the viral video app's future via a potential sale.

A quick look at the recent acquisition talk of TikTok by Microsoft.

Merger and acquisition deals between two companies are rarely simple. Microsoft’s attempt to buy Chinese short-video-sharing app TikTok is perfectly exemplifying the statement.

Microsoft’s attempt of inking an acquisition deal that satisfies not only both the companies, and their respective shareholders, but also aims at addressing US President’s worries. Microsoft is dedicated to obtaining TikTok, owned by ByteDance after the security review and ascertaining of the economic benefits to the US, which includes the US Treasury.

Furthermore, if the acquisition deal works out, it could be a boon to the business of the Washington-headquartered tech giant (Microsoft), bolstering its position in the United States, Australia, Canada, as well as New Zealand.

Notably, Microsoft would be concluding its discussions with ByteDance by no later than 15 September 2020.

Related Read; The TikTok Talk: Microsoft's Efforts around Pocketing a Big deal

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